Institutional investors’ horizon and equity-financed payouts

Wen He and Lin Mi

Journal of Banking & Finance, 2022, vol. 134, issue C

Abstract: Farre-Mensa, Michaely and Schmalz (2018) document that many firms issue new equity to finance their payouts to shareholders, despite the substantial cost of equity issuance. We find that equity-financed payouts are related to institutional investors’ horizon. Specifically, firms with a larger ownership by short-horizon institutions are more likely to have equity-financed discretionary payouts, and firms with equity-financed discretionary payouts tend to cut down their investments in the following years. Our results suggest that investor short-termism has significant effects on firms’ payout, financing and investment policies.

Keywords: Payout policy; Financing policy; Corporate investments; Short-termism; Institutional investors (search for similar items in EconPapers)
JEL-codes: G31 G32 G35 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:134:y:2022:i:c:s0378426621002752

DOI: 10.1016/j.jbankfin.2021.106324

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